The Advisors' Blog

In April, the SEC’s Office of Mergers and Acquisitions issued an exemptive order providing issuers and, in some cases, third party bidders with the flexibility to shorten the time period during which tender offers for equity securities must be open from 20 to 10 business days. In order to take advantage of the shorter tender offer period, the tender offer must satisfy several conditions, which vary depending on whether the target is a reporting or a non-reporting company.

The exemptive order isn’t just relevant to M&A. This Cooley alert explains how the new guidance can also help companies with equity award tenders in some circumstances. Here’s an excerpt:

Because of the conditions attached to the reduced 10-day tender period, the SEC relief should generally work in favor of companies, but it is limited. For both private and public company equity award tender offers, the 10-day window is effectively limited to company self-tenders for cash. Notably, it does not apply to tender offers in connection with repricings, modifications or option exchanges – areas where incentive equity compensation often implicates the tender offer requirements.

In the right circumstances – for instance, an option award buyback – a company will now be able to launch and close a cash tender offer more quickly than has been the case in the past, and can do so without inadvertently disqualifying options intended to qualify as incentive stock options.

Two caveats to note:

– First, because of the procedure used to grant the relief, it may be revoked by the SEC at any time.

– Second, and more importantly, the tender offer rules remain a highly technical and complicated thicket requiring great care to successfully navigate.

If you’re wondering about the impact of the SEC’s tender offer rules on option repricings, check out Meredith’s blog from last year as a starting point.

– Liz Dunshee